What's The Priority: Unemployment Or Deficit?

This is TELL ME MORE, from NPR News. I'm Michel Martin. Later in the program, Superstorm Sandy might've turned out the lights along the East Coast, but Twitter was ablaze with comments. We want to talk about the good, the bad and the ugly that Sandy brought out on social media. We'll have that conversation in a few minutes.

But first, in these closing days of the election, we want to talk more about the economy and how it's playing out as a political issue. And this is a good day to talk about this, because the latest jobs report is in. The Bureau of Labor Statistics is reporting that the U.S. economy added 171,000 jobs last month, but the unemployment rate also ticked up slightly from 7.8 percent in September to 7.9 percent.

Now, both candidates agree that the economy is a priority, but we thought it would be a good idea to ask just what aspect of the economy each is saying is most important. Is it cutting the deficit? Or reducing unemployment? Or both? And can you do both at the same time?

We're joined now to talk about this by writer and economist Julianne Malveaux, along with, once again, NPR senior business editor Marilyn Geewax.

Thank you both so much for joining us once again.

JULIANNE MALVEAUX: Good to be here. Thanks.

MARILYN GEEWAX, BYLINE: Hi, Michel.

MARTIN: So, Marilyn, I'm going to start with you, and I'm going to ask you just to set the table for us by digging into the latest jobs report. As we said, the economy added jobs, but the unemployment rate ticked up slightly. And I wanted to ask: Is this surprising? Is this good news, not good news?

GEEWAX: This report is really fundamentally pretty darn good. We've added that 171,000 jobs. Economists had been predicting only about 125,000 jobs. So it was an upside surprise. The unemployment rate did tick up slightly, a 10th of a point, but that was for good reasons, also, because something like almost 600,000 more people came into the labor force.

That is, when people are discouraged, when they feel like there's no work for them, they sit it out. But when they see jobs are picking up, they come back into the labor force. And that can make the unemployment rate tick up a little bit, because there are more people looking.

So when you look back on what's happened in August, September, the numbers got revised up. Actually, it was a little strong this summer than we had been expecting. That's all good. But, Michel, please, let me just point out there's a lot bad in this report, too. We still have more than 12 million people unemployed. The long-term unemployed, people who have been out of work for six months, it continues to be way too long.

Wages and hours are not growing. Wages are falling behind inflation, and that's not good. And, you know, even though I say 171,000 new jobs came online, that's great, but what we really need is about 350,000 jobs each month to get the unemployment rate down closer to 6 percent in the next two or three years.

MARTIN: To match the demand for jobs...

GEEWAX: Right. Right.

MARTIN: ...that has been there all along. Very briefly, Marilyn, I think some people might want to know this: Did the storm earlier this week affect these numbers at all?

GEEWAX: No. This is kind of interesting. This is an exact snapshot from just before the storm hit. The last of the data was collected just before Sandy came hurling up the East Coast. So this is a point in time. This is what the economy looked like before Sandy.

MARTIN: And, as we mentioned earlier, unemployment numbers are certainly a lot on people's minds, especially if you are unemployed. But there's also the budget deficit, which had been sitting at over $1 trillion for the past four years. The deficit is projected to drop to $901 billion this fiscal year, which just started. But if you're watching any of the political ads at all, you know that there's been a tremendous discussion about the deficit.

And this is where I want to turn to you, economist Julianne Malveaux. You still feel, as I understand it, that the weight of discussion on the deficit is misguided. There should be a lot more conversation about unemployment and addressing it. Tell us why.

MALVEAUX: Well, the deficit is, of course, important. There are issues about what the deficit does with interest rates and long-term credit worthiness. But you will not have a good deficit if you don't employ people. And, you know, as Marilyn has said, when you look at this employment report, there's lots of good news. There's lots of bad news.

The black unemployment rate ticked down just slightly from 14.2 to 14.1. The black women's unemployment rate rose from 10.9 to 12.4. A look at that number for black women - the majority of whom are leading households and doing things like that - as you talked about the long-term unemployment, 41 percent have not had jobs in half a year.

The American Jobs Act, Michel, has languished in Congress for more than a year. This was President Obama's attempt to get more people to work. If you get more people to work, here's what happens. They pay more taxes. That pushes the deficit down. They're largely more likely to be economic contributors. That pushes the deficit down.

I understand the concern about the deficit, and I would not ignore it. But most progressive economists - including Paul Krugman, Joe Stiglitz, a number of others - talk about the fact that cutting the deficit when there's not enough employment is really causing us to have a double-dip recession

MARTIN: But is it your point of view that the concern about the deficit is drowning out concern about unemployment?

MALVEAUX: It is. And if you look at both candidates - more so Mr. Romney talks about the deficit, but President Obama, I think, has also paid disproportionate attention to the deficit. Now he's, you know, campaigning. He's stuck between a rock and a hard place. And the American Jobs Act, which is his legislation, has languished in Congress because Republican folk in Congress have not moved it.

MARTIN: But is the reason it's stalled - isn't there a philosophical difference there about the best way to address unemployment? There was just a strong philosophical difference in that Republicans tend to believe if you address the deficit then unemployment will be addressed, as well?

MALVEAUX: Well, this is a trickle-down theory that was first basically laid out by David Stockman under Ronald Reagan, that if the top was doing well, then you could trickle it down to others. If the deficit were lower, then you'd trickle it down. Theoretically, a big deficit has an impact on interest rates, but interest rates right now are darn near zero.

So you really can't impact interest rates. The Fed has kept interest rates down because they're attempting to do what fiscal policy has not done in terms of generating employment. So lowering the deficit is not going to do anything to the interest rate.

MARTIN: If you're just joining us, this is TELL ME MORE, from NPR News. New unemployment numbers are out today. They show that employers added 171,000 jobs in October, but the unemployment rate ticked up slightly to 7.9 percent. And we're hearing that that's because there are actually more people looking for work.

We're speaking with economist and writer Julianne Malveaux. That's who was speaking just now. Also with us, NPR senior business editor Marilyn Geewax.

Marilyn, what's your perspective on this? I mean, since you're reporting with both economic decision makers and political decision makers in tandem, do you feel that they prioritize the deficit over unemployment?

GEEWAX: There is no question that the consensus is that the deficit needs to be addressed. I think, really, you would have 100 percent agreement among all economists that something has to be done to get government revenues in line with government spending and get those to match up a lot better than we've been doing.

The big dispute is over how you do this. It's sort of like going to your doctor and he says you've got to lose some weight. Well, you could do it sort of "The Biggest Loser" way, where you go on a crash diet for six months. You quit your job. You go crazy. You, you know, haul things up -rocks up hills and you eat 500 calories. And in six months, you're in much better shape.

The question is: What harm have you done to your body, to your family life, to all sorts of things by doing the crash diet in six months? Other people would argue that really, the better way to lose weight it to do it over time slowly, more sensibly. Maybe it takes you two or three years to get in shape, not six months.

So that's kind of where the argument is, is how do we lose this debt? Do we do it quickly or slowly? Now, the people who argue even if things happen that are not great by going on the crash diet, it's worth it to get in shape in six months, because when you look at what's happened in Europe, a debt crisis could just jump out and bite you.

You need to get in shape very, very quickly, because financial markets are looking for leadership from the United States getting these deficits under control. Other economists say, no, it's best to do it slowly.

MARTIN: Too much of a shock to the system or the long term harm, especially the social costs are too high, which is also an argument that you're hearing.

Julianne Malveaux, what is your sense among the economists that you talk to? Obviously, you consider yourself a progressive economist, but...

MALVEAUX: Yes, absolutely.

MARTIN: In your professional discussions, what do you hear among economists about - in waiting in between the deficit and unemployment or, as Marilyn put it, sort of addressing it aggressively? What are the discussions?

MALVEAUX: I love Marilyn's analogy about the biggest loser versus the gradual loser. That's a really great analogy. I plan to steal it. But the thing is that, going on the crash diet would likely have reverberations, not only domestically, but also internationally because we do a lot of trading. While people are looking to us for leadership, they also don't want to see the U.S. economy go back into a recession.

Now, we have two things going on that are really important. One is sequestration. After the election, we're going to have to deal with that. No matter how we deal with it, the - no agreement - we end up with cuts between seven and nine percent. That also precipitates recession-like activity.

The second thing, Michel, is that there is nothing wrong with carrying a modest amount of deficit. The deficit is something that's cyclical. When you have high unemployment, you expect to have a higher deficit because there is a drain on social services, unemployment insurance, all that stuff. When we have a vibrant economy with growth rates - right now, we're at two percent. What if we're at four percent? You would actually see the deficit reduce, almost on its own.

MARTIN: Finally, Marilyn, before we let you go, we've been talking a lot about what elites think, you know, what the policymakers think. Do we have any sense of how the public at large - how do they prioritize, you know, aggressive action on unemployment versus aggressive action on the deficit, if there is a choice? And do we have any sense of whether the public sees this election as a referendum on that choice?

GEEWAX: Well, in essence, that is going to be what happens with this election. You know, the Tea Party put a lot of focus on deficit reduction and that is very much a concern for conservatives and we'll see how the election turns out, where most people put their emphasis.

But there's one other point I wanted to make quickly, which is that, when you have a thing like Sandy, this super storm that hit, people pretty much agree that deficit spending makes sense. I don't think New Jersey is going to sit there and say, let's just let the waves lap up around our destroyed homes. There is going to be a real push to get things back to normal.

I think that, whether Congress likes it or not, in some ways, Sandy is going to turn out to be a big stimulus package because there's something like $50 billion worth of damage. An awful lot of construction workers are going to be hired, regardless of the cost. They're just going to have to be hired to get those subways running again, to clean up the beaches, so we may see a very big jobs program suddenly go into place all up and down the East Coast as people rebuild their homes and rebuild the infrastructure.

MARTIN: That was NPR's senior business editor, Marilyn Geewax. Also with us, writer and economist, Julianne Malveaux. They were both here with us in our Washington, D.C. studios.